Removing the Barriers to Housing Development in Israel

Excessive government intervention in the housing market makes housing in Israel much more expensive than it should be. Among the myriad artificial policies that constrain building in Israel, Kohelet researchers identified three cardinal barriers:

Public ownership that greatly restricts access to land;

A distortionary and centrally controlled municipal taxation regime that greatly reduces the incentives of municipalities to approve new construction;

and a cumbersome planning system that involves immense expense, time and uncertainty in getting approval even for building plans that completely conform to all relevant regulations.

Our recommendations are to immediately make a large amount of land in urban areas available for private ownership and development; to reform the municipal revenue structure in order to give local authorities more fiscal autonomy and restore their natural incentive to encourage development; and to implement reforms that would make approval of a building permit automatic contingent on the plan meeting whatever transparent criteria the planning authorities decide upon.